Bundled Payments for Physicians Put the 'F' in Follow-up

February 05, 2013

For the 100 or so physicians of the Illinois Bone & Joint Institute (IBJI) in Chicago, the word "follow-up" will acquire a capital "F" when it comes to hip and knee replacements under the Affordable Care Act (ACA).

The IBJI numbers among roughly 500 medical groups, hospitals, skilled nursing facilities (SNFs), home health agencies, and other healthcare organizations that will participate in the Bundled Payments for Care Improvement initiative, the Centers for Medicare & Medicaid Services (CMS) announced last week.

The initiative, authorized by the ACA, is intended to cure the problem of fragmented, uncoordinated care that occurs when Medicare pays multiple providers during an episode of care such as joint replacement. By giving such providers a single payment to share among themselves, CMS hopes that they will work together to improve patient care and cut costs. Teams that succeed will split a bonus.

The IBJI, for example, will team up with SNFs where joint replacement patients typically go after they are discharged from the hospital. David Wold, IBJI's chief operating officer, said that patients often stay at SNFs longer than they need to, running up costs. In addition, poor care at SNFs sometimes leads to quick hospital readmissions. The IBJI will work closely with its partner SNFs to keep those 2 expensive scenarios from materializing.

"In the past, orthopedic surgeons never worried much about what happened after the surgery," Wold told Medscape Medical News. "They didn't have a financial incentive to do that."

When the bundled payment program gets rolling for the IBJI, physicians will inform patients before their surgeries that if all goes well, they probably will stay at an SNF for 5 to 7 days before they graduate to outpatient rehabilitation, according to Wold. Medicare pays for a maximum 22 days in an SNF, which has encouraged these facilities to hold on to patients for the full period even though they could have been safety discharged long before then.

The IBJI also will encourage patients discharged from an SNF to use the group practice's own physical therapists. Wold said that the IBJI can not only provide better physical therapy than competing rehabilitation groups but also do it in fewer visits.

"By having the physician and therapist work together as a team," Wold said, "quality and utilization will be enhanced."

By Coming Under Target Cost, Providers Can Share in Savings

Similar to a car, the bundled payment initiative comes in different models, each with its own element of risk and reward.

Model 1 focuses solely on inpatient care. Medicare will pay a hospital a discounted amount — which serves as a target to beat — for any kind of episode of care, based on the rates set under the Inpatient Prospective Payment System. Physicians involved in patient care will receive their regular Medicare fee-for-service (FFS) rates. If the hospital can come under the target amount through more expedited, higher-quality care, it can reap the savings and share them with partnering physicians.

On January 31, CMS released a list of 32 hospitals that will implement model 1 as early as April. Twenty-nine are in New Jersey, 2 in California, and 1 in New York.

In model 2, the bundled payment covers a hospital stay and follow-up care, including physician services and hospital readmissions, for up to 90 days after discharge. Participants can select up to 48 clinical condition episodes for bundled payments. They include:

  • major joint replacement of the lower extremities,

  • chronic obstructive pulmonary disease with major complication or comorbidity,

  • permanent cardiac pacemaker implant with complication or comorbidity,

  • renal failure with major complication or comorbidity, and

  • syncope and collapse.

Again, participants will try to beat a target price for the clinical episode based on historical FFS payments for the episode of care. Providers will receive their usual FFS reimbursement, which is eventually added up and compared with the target price. If the hospital and its provider partners come in under the target, they share in the savings. If they exceed the target, they repay Medicare the difference.

Model 3 operates in the same way as model 2, except that it involves only services in an SNF, inpatient rehabilitation facility, long-term care hospital, or home health agency. There is no inpatient component. The episode of care is triggered by a prior hospital stay for any 1 of the 48 conditions. The IBJI in Chicago applied to participate in this model.

In the first 3 models, providers vie for a bonus at the tail end of a care episode. In model 4, Medicare gives a hospital a bundled payment up front for a selected episode of inpatient care, including readmissions within 30 days of discharge. The hospital then pays partnering physicians and other providers out of the prospective bundled payment. The challenge here is to stay within budget.

Last week CMS announced the names of more than 400 lead participants and partners selected for a preparatory phase of models 2, 3, and 4. CMS expects these groups to proceed with implementing their models — and assuming financial risk — beginning in July.

The IBJI's Wold said his group views the bundled payment initiative as a "great opportunity."

"We think our ability to better manage our patients," he said, "will result in improved quality...and lower costs."